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HomeMy WebLinkAboutHF&H Consultants, LLCTOWN OF LOS ALTOS HILLS 2019 Sanitary Sewer Rate Study Amendment No.1 Scope of Work - Connection Fee Analysis HF&H Consultants, LLC - February 10, 2020 BACKGROUND In October 2019, the Town of Los Altos Hills, CA engaged HF&H Consultants to update the Town's sanitary sewer service charges. Working with Town staff, HF&H calculated the sewer service charges for the next five fiscal years by projecting operating and capital expenses and comparing them with projected revenue from current rates. Annual surpluses and deficits were then applied to the reserve funds and rates were adjusted so that the expenses were covered and operating and capital reserves targets were met. HF&H determined that no rate increase was necessary for fiscal year 2020-21. This work was conducted with an original budget of $32,430, which was more than what was needed. Since the rates will not be increased, a Proposition 218 notice will not be necessary. In January 2020, Town staff asked HF&H to update the Sanitary Sewer Enterprise's connection fees as a scope amendment to the original contract. This amendment proposal describes the background, approach, scope of services, staffing, fee estimate, and schedule for the proposed project. APPROACH Our approach to deriving connection fees is based on years of experience working with public agencies and the development community. We propose a simple methodology that is easy to explain and understand, easy to administer in the future, and is in full compliance with Government Code Section 66000 et seq. To this end, we calculate connection fees that are based on the unit cost of capacity. The cost of capacity equals the value of existing and planned facilities. The value of existing facilities is based on an inventory of the existing facilities that currently provide service, including the original cost and acquisition dates. With this information, we can escalate the original costs from the date of acquisition to today. If either original costs or acquisition dates are not available, estimates will be required. For example, using current bid information from the Town's construction projects, we can calculate the value of other similar existing facilities. The value of future, planned facilities will also be included in the calculation. The use of the most recent sewer master plan would serve as source documentation for future, planned facilities. Budget Amendment - Connection Fee Analysis February 10, 2020 Page 2 of 3 The sum of the value of the existing and future facilities represents the value of the sewer system that provides capacity for growth and for which rate payers should be reimbursed. By dividing the sum of the existing and future facilities by the corresponding capacity it provides, the unit cost of capacity is determined. This unit cost is the amount that should be paid by growth to ensure that growth participates at the same level of capital investment that is common to all connections. SCOPE OF SERVICES Task 1. Collect and Review Data Working with Town staff, we will collect and review the Towns inventory of existing facilities that currently provide service and the recent capital improvement plan for future improvements to existing facilities and/or construction of new facilities. Task 2. Calculate Connection Fees With the information collected in Task 1, we will estimate the cost of existing facilities by escalating the original costs from the date of acquisition to today. If the Town's records are incomplete, we will work with Town staff to create a reasonable approximation of the sewer system's facilities, which we will carefully document for future reference. The value of future, planned facilities will also be included in the calculation. A simple spreadsheet model will be prepared consolidating the inventory, cost, and acquisition date information for the sewer system's existing and future facilities. The model will also,reflect any adjustments that are warranted. For example, significant developer contributions may be excluded because they do not constitute costs borne by rate payers for which reimbursement is required. The nature of any adjustments will be discussed with Town staff prior to including them in the model. Task 3. Communicate Results A brief report will be prepared describing the derivation of the connection fees. The report will be prepared in draft and final form. The report will contain an appendix of the assets that are included in the calculation and any other support documents. The report text and appendix will document the proposed connection fees as well as provide a solid basis for future updates. We will attend one Town Council meeting to summarize the connection fee analysis for the benefit of the Council and public. We will also assist staff in reviewing and editing a staff report. Budget Amendment - Connection Fee Analysis February 10, 2020 Page 3 of 3 STAFFING The project will be staffed Rick Simonson, Vice President, and Geoffrey Michalczyk, Senior Associate. We will compile background information, prepare the analyses and models that may be required, and produce a report. This approach will allow us to complete the project in a timely manner and allow for quality control by cross checking each other's work. FEE ESTIMATE The rate study work was conducted with an original budget of $32,430, which was more than what was needed. Since the rates will not be increased this fiscal year, a Proposition 218 notice and further implementation tasks will not be necessary, as originally planned. We estimate that forgoing these tasks will save approximately $8,000. We propose that we increase the project budget by $7,000 which will leave approximately $15,000 to complete the connection fee analysis. This will increase the total not -to -exceed project budget to $39,430. SCHEDULE This work can proceed quickly once the best available data are compiled. Depending on the condition and availability of the data, 60 to 90 days should be sufficient to complete the work, allowing some time for Town review. We hope this proposal is responsive to the Town's requirements. Please let me know if any revisions are needed. I would like to thank you for requesting this proposal from us. We consider it a privilege to assist the Town with this matter. Sincerely, HF&H CONSULTANTS, LLC ichard J. Simonson Vice President Accepted on behalf of the 7Nwn of Los Altos Hills this day of cc 2020. (Signature) carr (Printed Name) cl j _h' mAger (Title) ADDENDUM TO PROFESSIONAL SERVICES AGREEMENT This Addenjum To Professional Services Agreement (the "Addendum") is made and entered into on the 1 -1 1)'' --day of June, 2021 by and between the Town of Los Altos Hills (herein referred to as "Town") and HF&H Consultants, LLC (herein referred to as "Contractor"). In consideration of their mutual covenants, the parties hereto agree as follows: 1. This Agreement amends and modifies the Professional Services Agreement ("Agreement") dated October 18, 2019, and Amendment No. I dated February 10, 2020, made and entered into by the parties here as follows: a. The scope of work is amended to provide additional funding needed to complete the connection fee study. b. The additional funding is an amount not to exceed eight thousand dollars and zero cents ($8,000). c. With this Addendum and Addendum No. 1 to the Agreement, the total compensation for the Contractor is an amount not to exceed forty-seven thousand four hundred and thirty dollars and zero cents ($47,430) 2. All other provisions of the Agreement and Amendment No. 1 remain in full force and effect, other than any provision that conflicts with the terms and spirit of this Addendum, which shall be deetned to be amended appropriately in order to be consistent with this Agreement. IN WITNESS WHEREOF, the Parties have executed this Addendum on the date first written above. CONTRACTOR: Richard J. �jd—ionson, Senior Vice President Date TOWN OF LOS ALTOS HILLS: By: Carl Cahill, City Manager Da e TOWN OF LOS ALTOS HILLS 2019 Sanitary Sewer Rate Study - Project #W3798 Amendment No. 2 Task 7 Connection Fee Study HF&H Consultants, LLC - May 25, 2021 BACKGROUND In October 2019, the Town of Los Altos Hills, CA engaged HF&H Consultants (HF&H) to update the Towr s sanitary sewer service charges. Working with Town staff, HF&H calculated the sewer service charges for the next five fiscal years (FY 2020-21 through FY 2025-26) by projecting operating and capital expenses and comparing them with projected revenue from current rates. Annual surpluses and deficits were then applied to the reserve funds and rates were adjusted, if necessary, so that expenses were covered and operating and capital reserves targets were met. HF&H determined that no rate increase was necessary for fiscal year 2020-21. This work was conducted with an original budget of $32,430, which was more than what was needed. Since FY 2020-21 sewer rates did not need to increase, the Town could forego the Proposition 218 rate setting process, which had been part of the original budget. As such, upon delivery of the final report, $8,000 of the original budget remained. Subsequently, with the remaining budget, Town staff asked HF&H to conduct a Connection Fee study, as a scope amendment to original 2019 sewer rate study contract. The parties agreed to increase the original budget by $7,000, in order to conduct the $15,000 connection fee study ($8,000 would be used from the unused funds from the original sewer rate study project plus an additional $7,000). HF&H and Town staff proceeded to conduct the Connection Fee study; however, Town staff was not able to provide all the necessary historical data to value the Town's sewer system and its cost of capacity in the wastewater treatment facility, which is the basis for developing a connection fee for those new customers who connect to the Town's wastewater system. HF&H and Town staff continued to discuss alternative approaches to developing the connection fees using readily available data; however, before the study could be completed, there was turnover of Town staff in March 2021. At that time, approximately $4,000 remained of the original $15,000 budget. As requested, we have prepared this revised scope of work and fee estimate to complete the Connection Fee study for the Town. This amendment proposal (Amendment #2) describes the remaining work to be done to complete the Connection Fee study, staffing, fee estimate, and schedule. Budget Amendment - Connection Fee Analysis May 24, 2021 Page 2 of 4 APPROACH Our approach to deriving connection fees is based on years of experience working with public agencies and the development community. We propose a simple methodology that is easy to explain and understand, easy to administer in the future, and is in full compliance with Government Code Section 66000 et seq. To this end, we calculate connection fees that are based on the unit cost of capacity. The cost of capacity equals the value of existing and planned facilities. The value of existing facilities is based on an inventory of the existing facilities that currently provide service, including the original cost and acquisition dates. With this information, we can escalate the original costs from the date of acquisition to today. If either original costs or acquisition dates are not available, estimates will be required. For example, using current bid information from the Town's construction projects, we can calculate the value of other similar existing facilities. The value of future, planned facilities will also be included in the calculation. The use of the most -recent sewer master plan would serve as source documentation for future, planned facilities. The sum of the value of the existing and future facilities represents the value of the sewer system that provides capacity for growth and for which rate payers should be reimbursed. By dividing the sum of the existing and future facilities by the corresponding capacity it provides, the unit cost of capacity is determined. This unit cost is the amount that should be paid by growth to ensure that growth participates at the same level of capital investment that is common to all connections. SCOPE OF SERVICES Update Model and Calculate Connection Fees We will review the current version of the Connection Fee model developed with the prior Town staff. This review will highlight our approach, the information received to date, and the information still needed. We will work with Town staff to finalize the value of existing facilities which have been paid for by current ratepayers, careful to exclude any sewer system facilities which were contributed by developers at no charge to the Town, as well as in -tract facilities that do not provide capacity to growth. If the Town's records are incomplete, we will work with Town staff to create a reasonable approximation of the sewer system's facilities, which we will carefully document for future reference. Budget Amendment - Connection Fee Analysis May 24, 2021 Page 3 of 4 The value of future, planned facilities will also be included in the calculation. A simple spreadsheet model will be prepared consolidating the inventory, cost, and acquisition date information for the sewer system and treatment plant's existing and future facilities. The model will also reflect any adjustments that are warranted. For example, planned developer contributions will be excluded because they do not constitute costs which will be borne by rate payers for which reimbursement is required. The nature of any adjustments will be discussed with Town staff prior to including them in the model. Communicate Results A brief report will be prepared describing the derivation of the connection fees. The report will be prepared in draft and final form. The report will contain an appendix of the assets that are included in the calculation and any other support documents. The report text and appendix will document the proposed connection fees as well as provide a solid basis for future updates. We will attend one Finance & Investment Committee (FIC) virtual. meeting to review the preliminary results, answer questions, and revise the analysis and draft report, if appropriate. This meeting was not contemplated in the original scope and fee estimate of Amendment #1. We will attend one Town Council virtual meeting to summarize the connection fee analysis for the benefit of the Council and public. STAFFING The project will be staffed Rick Simonson, Senior Vice President, and Geoffrey Michalczyk, Senior Associate. We will compile background information, prepare the analyses and models that may be required, and produce a report. This approach will allow us to complete the project in a timely manner and allow for quality control by cross checking each other's work. FEE ESTIMATE To complete the Connection Fee study, we request a budget increase of $8,000. This will increase the previously approved not -to -exceed project budget (Project #W3798), which included tasks to complete a Sewer Service Charge Rate Study (final report delivered March 12, 2020) and a Connection Fee Study, from $39,430 to $47,430. SCHEDULE Budget Amendment - Connection Fee Analysis May 24, 2021 Page 4 of 4 This work can proceed quickly once the best available data are compiled. Depending on the condition and availability of the data, 60 to 90 days should be sufficient to complete the work, allowing some time for Town review. We hope this budget amendment proposal is responsive to the Town's requirements. Please let me know if any revisions are needed. I would like to thank you for requesting this proposal from us. We consider it a privilege to assist the Town with this matter. Sincerely, HF&H CONSULTANTS, LLC ichard J. Simonson Senior Vice President Accepted on behalf of the Town of Los Altos Hills this day of 2021. (Signature) (Printed Name) (Title)